An interesting article on:

Can I Afford a House at current prices?

from the Financial Literates blog.  Check it out.

News Items on my Scoop.it pages

Check out the following Scoop.it pages for more on the news items on Inflation in the past 2 months.

Chennai Inflation
India Inflation

WPI Trends Nov 2012 - Part 4/4 - Dairy Products, Tea, Coffee, Sugar

WPI Trends Nov 2012 - Part 3/4 - Oils

WPI Trends Nov 2012 - Part 2/4 - Vegetables & Fruits

WPI Trends Nov 2012 - Part 1/4 - Cereals and Pulses

The Hindu : Columns / Chandrasekhar : The food crisis and India

For a sense of how the food inflation has become a huge problem check this out...

The Hindu : Columns / Chandrasekhar : The food crisis and India

Articles on Food Inflation

Here are some of the news items relating to inflation in the past week/month.  I am working on some aspects of food inflation and will have a posting early next week.

• Further rise in prices seen as risks abound (Economic Times)
• Inflation risks have escalated during the past three months: Subir Gokarn, Deputy Governor, RBI (Economic Times)
• India to witness a drought year: Here’s how it will affect you (NDTV Profit)
• Ourview | India’s twin-track inflation (LiveMint)
• Food inflation not due to income - a well researched article from Hindu Businessline
• Monsoon blues: Brace for price increases in food items (Business Standard)

Also check for my post last week titled Food Inflation - Jan 2011 - Jun 2012 to view graphically for the inflation in prices of food items.

Please send me a note if you have any inputs/feedback.

Food Inflation - Jan 2011 - Jun 2012

It is not surprising to see that inflation in food prices is the highest among all items in the Wholesale Price Index data.

Here are some graphs drawn with data from the Wholesale Price Index for articles that are food related.  The WPI index is released every month and I will try to update the graphs on a monthly basis.

Each item is indexed at 100 with the base year as 2004-05.

The following graph contains all items that goes to make a coffee or tea.

Wholesale Prices - Dairy & Associated
items that is used for Coffee/Tea

Oil is an essential item on our diet.  India imports quite a huge amount of edible oil due to supply not matching demand.  The following includes most items excluding coconut oil which is not used in a big way for food.

Wholesale Prices - Edible Oils

This item is the most volatile of all items.  Some of the vegetables are seasonal as well and hence some of the data is not available.

Wholesale Price Index - Vegetables

Foodgrains are an essential item and with the monsoon failing this is going to be the item with the most inflation in the coming months.  Watch out for the price rise.

Wholesale Price Index - Foodgrains

 All the above graphs represent the wholesale prices which is more tied to the demand (thus a possibility of prices artificially inflated as well) as well as the production cost and production (supply).

The retail prices aren't aggregated as much as the wholesale price data.

Housing Prices - Chennai, the most expensive city

After posting an article on Rental prices last week, I was looking at the owned property prices to check if there was any data available.  Reserve Bank through its owned subsidiary, National Housing Bank, has been  collecting statistics since 2001 but has folded them into an index called RESIDEX and has expanded the index to cover more cities starting 2007.  RESIDEX comes with a base of 100 in the year 2007.  Here is the graphic how the housing inflation has been since 2007.

Chennai gets the recognition for the city with the highest inflation in housing prices since 2007.  The inflation is 200%.

If you have more data that you are aware of with respect to housing, please share with me your inputs. Thx.

Additionally there is current data for the following cities but there are no trends available.

City	2007	Q1 2012
Bhubaneshwar	100	161
Guwahati	100	157
Ludhiana	100	163
Vijayawada	100	184
Indore	100	208

Chennai inflation - Housing

There is very little aggregated data available to provide a trend on Housing inflation. Sulekha did a study using the published rental ads to come up with a trend of rental prices of 2011 vs. 2010.

You can find the results of Sulekha's study here.

This post is a work-in-progress.

The Great Power Tariff Hike of 2012

Power tariffs in Tamilnadu underwent a major revision in April 2012.  You can view the new tariffs here.

Major components of the hike

• The subsidy that was provided to low tension customers for the consumption portion below 500 units has been removed.  
•  The subsidy for the other categories of domestic consumers has been retained. For example, those consuming up to 100 units bimonthly will get a subsidy of Rs. 1.50 per unit for all 100 units
• The hike in the tariff ranges between 75 per cent and 110 per cent for consumers consuming more than 500 units (over 2 months)
• The four-tier slab system for domestic consumers would replace the five-tier slab system.  Please check the slabs in the tariff document.

Consumer Price Index Jun 2012

The CPI (Consumer Price Index) numbers for June 2012...

Type	May 2012	Jun 2012
Consolidated	10.36	10.02
Urban	11.52	10.44
Rural	9.57	9.74

Highlights (in brief):

• Vegetables costlier by 27.60 percent
• Edible oils by 16.58 percent
• Milk products by 12.75 percent
• Fruits by 6.92 percent

Here is the breakdown of CPI Data for Tamilnadu (The base is 100 in the year 2010)

Tamilnadu	Attribute	Urban	Rural	Combined
	Food, beverages and tobacco	120.7	120.9	120.8
	Fuel and light	130.3	132.4	131.4
	Clothing, bedding and footwear	124.1	125.4	124.8
	Housing	NA	122.0	NA
	Miscellaneous	120.3	117.0	118.6
	General Index	121.6	121.2	121.4

It is interesting to compare the above with Puducherry's numbers given below.

Puducherry	Attribute	Urban	Rural	Combined
	Food, beverages and tobacco	120.8	120.9	120.9
	Fuel and light	120.9	117.4	118.6
	Clothing, bedding and footwear	132.7	126.7	128.5
	Housing	NA	117.9	NA
	Miscellaneous	116.1	115.5	115.7
	General Index	120.0	118.8	119.1

If you are interested in numbers for other states, you can find it here.  The constituents of each attribute can be found in this document..

You can find the analysis of the CPI numbers on  Firstpost, Financial Express and many other newspapers.  Based on the numbers of CPI and WPI, it is not expected that the RBI to cut policy rates on the 31st of this month.  Hence your rates on loans is unlikely to come down anytime soon.

Background on CPI - The CPI index was only published starting January of 2012 and hence does not have much history associated with it.  There is a good analysis that you may be interested in.  

The RBI relies more on the WPI (Wholesale Price Index) number for its policy decisions (which includes the interest rates, CRR) currently.  The RBI's current perspective about inflation indices is echoed from the governor's recent speech: 

In its present structure, the WPI does not capture the price movement of services. Also, it is a hybrid of consumer and producer price quotes. For example, the index captures the price of important commodities like milk from the retail markets; not at the producer level. In contrast to CPI, PPI measures price changes from the perspective of the seller. Sellers’ and purchasers’ prices differ due to government subsidies, sales and excise taxes, and distribution costs. For these reasons, it is, therefore, desirable that we move towards developing a Producer Price Index (PPI) that measures the average change over time in the sale prices of domestic goods and services. 

Hoping that the central bank has the data in future to come up with the right policy rates.

Fuel Price Management

The magnitude of the twin deficits of current account deficit and fiscal deficit over time results in depreciation or appreciation of the rupee.  Since the crude prices are marked against the dollar and when the rupee/dollar rate fluctuates, the import price of crude oil is higher.

For simplistic reasons, I have multiplied the crude oil price on a given day against the forex rate for that day. I have not considered the indian basket price as well.  Just for analysis, I present the complete graph of petrol, diesel (marked on the left y axis in Rs.) and the product of crude and exchange rate (barrel price in Rs. on the right y axis) for the last 10+ years.  The following chart (click for a larger display) is a very good illustration of how the fuel price has been managed by the government of the day as well as the oil companies.




A few things stand out:

• Ratio of Petrol/Crude rise to Diesel/Crude rise is a big concern (That is the subsidy given)
• The Ratio of crude rise to Petrol rise is more than 1 (Were the oil companies making lot of money in the 2002-2011 timeframe?)

A big thanks to MyPetrolPrice, X-rates & EIA for the various data used in this chart.

Why is solving Indian's inflation crisis so important?

The following graph gives you the trend of inflation in India in the past 10+ years. Inflation has been unsustainable during the past few years. CPI is the Consumer Price Index. CPI data is released every month and I hope to update it on this blog when it is released.

Read Why is solving India's Inflation crisis so important? to understand why it is so important to solve the problem.

School Fees & Educational costs

School Fees and Educational costs has become a major expense.  While the Tamilnadu government came up with a committee to decide the fees for all schools, the courts struck down the committee's final orders and the CBSE schools have been given some freedom to have an increased fee.

Please check this article on this subject.

It is my intent to crowdsource fees from many institutions in Chennai so that we can have way to ascertain whether the fees charged is commensurate with the quality of education or the services provided.  

History of Petrol Price hikes

You can see the history of Petrol price changes in Chennai.

This post is a work in progress.

Milk and Bus Fare Hike - Nov 2011

The Bus fares and Milk prices were hiked in Nov 2011.

You can check the details at this location.
If you have a good logo for the different categories, please share with me.

Bus Fare Inflation

MTC hikes fares due to Metro diversions

Vision Statement

This is a blog to highlight the different aspects of Inflation that Chennai-ites face. I intend to provide some organization in terms of data. Hopefully we can bring out the positives or negatives impacting Chennai city over time.

The inspiration for this blog came from the Neeya Naana episode on 15th Jul 2012.  You can view the episode @ http://www.tamilkey.com/neeya-naana-15-07-2012.html.

Please share any inputs on

• format you want to view (I am experimenting with views at this point)
• tagging keywords (I expect this to be a useful filter over time)
• Colours which are easy on your eyes.
• Any other useful inputs for this blog...

(Updated 7/20)

Some cost items that affect a Chennai resident...

• Housing (Rented, Owned)
• Groceries (Includes Milk products, Fruits & Vegetables)
• Travel (short and long distance from Chennai)
• Undocumented items (Auto etc.)
• Your speculative investments (Gold etc.)
• All other financial investments (not really Chennai-specific)
• Electricity & Fuel costs
• Commute costs (if you don't own a vehicle)
• Medical costs
• Insurance 
• Education

Hopefully this site will be able to give a tracker/trend of all the above over time.